April 10, 2017

Brazilian Soybean Prices Slumping, Farmers Remain Slow Sellers

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Soybean prices for farmers in Brazil declined significantly last week from $0.10 to $1.50 per bushel depending on location. According to Noticias Agricolas, which tracks soybean prices in Brazil, in Sorriso, Mato Grosso the soybean price last Friday was R$ 49.00 per sack (approximately $7.18 per bushel). In Cristalina, Goias it was R$ 50.00 per sack (approximately $7.33 per bushel). The highest price in the survey was in Ponta Grosso, Parana at R$ 62.00 per sack (approximately $9.10 per bushel). Ponta Grosso usually has one of the highest prices in Brazil due its close proximity to the Port of Paranagua.

The slumping prices are a reflection of a number of factors including: lower international prices, a record large 2016/17 Brazilian soybean crop, U.S. farmer's intention to plant a record large 2017 soybean crop, a stronger Brazilian currency, and weak domestic demand for soybean meal due to the recent meat scandal in Brazil.

Exporters have purchased enough soybeans to meet their immediate needs so they have not been aggressive in their bids for more soybeans and they probably won't be aggressive until the month of May. Soybean prices in Brazil might move a little higher in May due to a number of potential factors including: a pickup in domestic soybean meal demand as the impact of the meat scandal starts to wear off, potential flooding issues in Argentina, and a potential weather problem in the U.S. that could delay planting.

Many farmers have indicated that they will continue to be relatively slow sellers of their remaining crop in the hope of improved prices going forward. Nationwide, Brazilian farmers have sold 45% of their anticipated soybean production compared to 60% sold last year at this time.

The Mato Grosso Institute of Agricultural Economics (Imea) estimates that as of mid-March farmers in the state had sold approximately 61% of their soybeans compared to 66% sold in mid-March of last year. The average selling price thus far in the state has been approximately R$ 66.19 per sack or approximately $9.70 per bushel, but prices have declined significantly in recent weeks.

Thus far, most farmers have been able to sell their soybeans at a profit due to the very high yields, but it remains to be seen if they will be able to sell the remainder of their crop at a profit.

Farmers in Mato Grosso are also hoping that their safrinha corn production will be profitable, but that remains to be seen. Thus far, the growing conditions for the safrinha corn have been good as the early planted corn enters into pollination. Corn prices though have not been good and farmers have only forward contracted approximately 40% of their anticipated corn production as of mid-March compared to 80% in mid-March of last year. It is possible that farmers in Mato Grosso may be forced to sell their remaining corn at a loss.

Looking toward the 2017/18 soybean crop in Mato Grosso, Imea is anticipating that the cost of producing soybeans in 2017/18 will decline due to a stronger Brazilian currency, which lowers the prices for imported items such as fertilizers and chemicals. The Brazilian currency is currently trading at approximately 3.1 to the dollar compared to 3.6 last year at this time. If the cost of production actually decreases in 2017/18 it will be the first decrease in several years.

Imea is estimating that it would take an average selling price of R$ 55.71 per sack (approximately $8.16 per bushel) in March of 2018 for farmers in the state to cover their production costs. If that turns out to be the case, they would need to produce approximately 50.6 sacks per hectare (44 bu/ac) to cover their production costs.